People: Bill O'Brien, Havi Food Services

Bill O'Brien looks for challenges on the road less traveled. If someone has already been there and done that, chances are he'll veer in the opposite direction.

As president of Havi Food Services in China, O'Brien has charted an unconventional course—overseeing from scratch the development of a world-class cold chain in a region plagued by food-safety issues.

Today, Havi's China operation provides food storage, logistics, and distribution services to McDonald's, its largest client, as well as a number of other high-profile restaurants and retailers operating in Beijing, Shanghai, Hong Kong, Taiwan, and points in between.

O'Brien began operations in China with what he calls "barely viable facilities"—deteriorating warehouses, trucks in need of maintenance and repair, and a dearth of freezers.

Today the 55-year-old presides over a Chinese workforce of 450 and a growing network of dedicated facilities and distribution centers that has become the leading model of cold chain and food safety in China.

Managing this transformation required resourcefulness and determination, not to mention a deep understanding of Chinese culture. By dint of his personality and biography, O'Brien was the person for the job.

O'Brien's interest in China dates back to his teen-age fascination with all things Asian—food, philosophy, history, and culture. The then-raging Vietnam War kept Asian countries in the headlines, and from his New Jersey vantage point, the young O'Brien yearned to learn more.

"First chance I got, I began studying Chinese language," he recalls.

Six years of intensive study left him itching for an immersive experience. That came in 1979, when a U.S. government scholarship funded research in Taiwan. In 1981, as one of only two scholars with Fulbright research grants for mainland China, O'Brien attended Beijing University to continue his academic work.

The country he found then was vastly different from the economic giant he lives in today. In the Beijing of 25 years ago, private cars numbered in the dozens, while bicycles ruled the road. Today, tens of thousands of automobiles clog the streets and, along with industry, foul the air.

"People marvel at the fact that I still have full lung capacity," O'Brien jokes.

After securing his Ph.D. in Chinese intellectual history from the State University of New York, O'Brien cast his net out for new opportunities, preferably in China. The historian in him wanted to see how China, which was just opening up its markets, would adapt to Western influences and business practices. The trailblazer in him wanted a job that would harness and test all his skills.

The first opportunity came with the drilling operation of international oil services company Schlumberger, which was working in the South China Sea. Because of his fluency in Chinese and his insight into the culture, O'Brien was hired as human resources manager.

He later returned to the United States to run a consulting firm but was lured back to China by other opportunities, including a stint with global industrial manufacturer H.B. Fuller.

New Challenges

While on the H.B. Fuller payroll, he was featured in a Wall Street Journal article that highlighted his maverick work style and insight into Chinese society. That article came to the attention of Havi Group executives, then searching for someone to head their relatively new China operations.

"I knew nothing at all about the logistics business," O'Brien says. "Havi hired me because of my experience in China, not because of my logistics experience."

Steve Romberg, president and chief operating officer of Havi Group, agrees. "We figured we could teach him the logistics part," he recalls.

What Havi couldn't teach, however, was the language, the culture, and the inside knowledge about daily life in China.

O'Brien's tenure with Havi began in 1993, just as the firm was realizing the scope of its challenges in China. "In those early days, no one knew much about logistics in China," he notes. "The challenge was putting in place the logistics systems, people, and assets.

"If you wanted a contiguous cold chain, you had to develop it yourself," O'Brien says. That meant building warehouses, organizing distribution centers, procuring refrigerated trucks, plotting routes, and cultivating a staff with the know-how to clear hurdles and jump-start systems.

"Fortunately, China has an ample supply of well-educated, hard-working people," O'Brien says. "Havi has been able to recruit and keep these people."

Emphasis on keep. Over the years, his management team has experienced less than 2 percent turnover—a low margin for a service business in China.

O'Brien attributes his team's cohesion and success to two factors. First, he and his Chinese employees share an intense dedication to their customers.

Second, his Chinese management team has been responsive to a leadership style that friends and colleagues describe as innovative and unorthodox.

"Bill is the consummate character," Romberg says. "While most people approach a problem in a traditional way, Bill looks at it from a holistic perspective. You know the expression 'out of the box'? Bill doesn't even have a box. It's just clean-slate thinking."

O'Brien prizes taking risks and challenging conventional wisdom. "I spend a lot of time getting people to think about breaking out of existing paradigms," he says. With that in mind, O'Brien sends his management team on perspective-changing mountain climbs and breakneck spins around racetracks.

Can-Do Confidence

This quintessentially American approach to management resonates well with his Chinese team, which now embraces its challenges with can-do confidence. "Bill has been able to marry these two cultures and communicate to employees where the company needs to go and how we need to get there," Romberg explains.

Todd Nelson, a former member of O'Brien's management group, and currently a competitor at Kentucky-based YUM! Brands, salutes O'Brien for the clarity of his vision.

"Each year, Bill's plan was built on the vision he created with his team. Tactics might change due to conditions, and successes or setbacks in the year just past, but the pursuit of the overriding vision never changed," says Nelson.

Although O'Brien is proud of the work Havi has done in China, he is distressed about food safety outside the McDonald's/Havi network, where minivans and open vehicles are used far more often than refrigerated trucks to transport food.

"The cold chain doesn't exist in China today outside of companies such as Havi," he says. "Stand outside an average supermarket in China, and you will see dozens of deliveries each day. A good portion of these are food products that should be temperature-controlled. Instead, they arrive on bicycles, tricycles, or in taxi cabs."

Matters are made worse by an inadequate regulatory structure that means a lot of food is never inspected along the supply chain. It arrives spoiled and nonetheless is too often sold or served. Not surprisingly, food safety is a key issue in China, O'Brien says.

In addition to compromising human health, food safety issues represent a huge liability for China's economy. Restaurants and markets lose much of their food—and their potential profits—to waste. With the 2008 Olympics slated for Beijing, food safety issues could also compromise tourists' experience and leave China deeply embarrassed.

To address these problems, the Chinese government needs to implement a rigorous regulatory environment that sets standards and mandates inspections, O'Brien says. But the business community needs to do its part as well. That means moving from small-picture to big-picture thinking.

"Our biggest challenge in China is that the investment environment still overemphasizes hard assets—warehouses and trucks," he explains.

While those should not be undervalued, businesses—both domestic and foreign—need to channel their resources to people and systems. That means optimizing networks, routing, and assets, O'Brien says. Only then can they create a cost-efficient perishables chain that maximizes value for retailers and restaurants.

O'Brien is not confident that such a shift in thinking is imminent.

Consider this troubling tale, culled from a recent cold chain summit conducted by the China Supply Chain Council, where O'Brien was a speaker. One attendee claimed China could not afford a sophisticated Havi-style cold chain because cheap food, not safe food, is the nation's priority.

"I lit into the guy," O'Brien recalls. "Ever since I have been here, Chinese customers have struggled to buy better quality food and products. His assertion that Chinese consumers cannot afford food safety shocked me."

O'Brien comes by his outrage naturally. As Romberg notes, he has embraced China's culture wholeheartedly. He is a patron of China's restaurants and a shopper at its markets. Just as important, he's an employer, neighbor, and friend of other consumers.

As O'Brien sees it, they deserve the confidence that comes with a viable, state-of-the-art cold chain.